Not all profitable companies are built to last - some rely on outdated models or unsustainable advantages. Just because a business is in the green today doesn’t mean it will thrive tomorrow.
Not all profitable companies are created equal, and that’s why we built StockStory - to help you find the ones that truly shine bright. Keeping that in mind, here are three profitable companies to avoid and some better opportunities instead.
Brinker International (EAT)
Trailing 12-Month GAAP Operating Margin: 10.3%
Founded by Norman Brinker in Dallas, Brinker International (NYSE: EAT) is a casual restaurant chain that operates the Chili’s, Maggiano’s Little Italy, and It’s Just Wings banners.
Why Do We Think Twice About EAT?
- Limited expansion of restaurants suggests it’s prioritizing efficiency over growth at this stage
- Estimated sales growth of 3.1% for the next 12 months implies demand will slow from its six-year trend
- Challenging supply chain dynamics and bad unit economics are reflected in its low gross margin of 17%
Brinker International’s stock price of $103.64 implies a valuation ratio of 10x forward P/E. Read our free research report to see why you should think twice about including EAT in your portfolio.
BrightSpring Health Services (BTSG)
Trailing 12-Month GAAP Operating Margin: 2.1%
Founded in 1974, BrightSpring Health Services (NASDAQ: BTSG) offers home health care, hospice, neuro-rehabilitation, and pharmacy services.
Why Is BTSG Not Exciting?
- Earnings per share have dipped by 46% annually over the past four years, which is concerning because stock prices follow EPS over the long term
- Investment activity picked up over the last five years, pressuring its weak free cash flow margin of 1.3%
- ROIC of 3.9% reflects management’s challenges in identifying attractive investment opportunities
BrightSpring Health Services is trading at $33.07 per share, or 26.3x forward P/E. To fully understand why you should be careful with BTSG, check out our full research report (it’s free for active Edge members).
Pediatrix Medical Group (MD)
Trailing 12-Month GAAP Operating Margin: 10.4%
With a network of approximately 2,620 affiliated physicians caring for some of the most vulnerable patients, Pediatrix Medical Group (NYSE: MD) provides specialized physician services focused on neonatal, maternal-fetal, pediatric cardiology and other pediatric subspecialty care across 37 states.
Why Are We Cautious About MD?
- Weak comparable store sales trends over the past two years suggest there may be few opportunities in its core markets to open new facilities
- Sales are projected to be flat over the next 12 months and imply weak demand
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
At $21.66 per share, Pediatrix Medical Group trades at 10.8x forward P/E. Check out our free in-depth research report to learn more about why MD doesn’t pass our bar.
High-Quality Stocks for All Market Conditions
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.
